South American Crop Estimates Continue To Decline

January 4, 2012 12:25 AM

What Traders are Talking About:

* South American weather -- Hot and dry with a chance of scattered rains. Forecasts continue to call for hot, dry conditions across central Argentina, with very little chance for meaningful precip through the weekend. Some forecast models are suggesting a better chance for rains next Tuesday and Wednesday. In southern Brazil, there are scattered rain chances through the weekend, but conditions are expected to be generally hot and dry. There are better rain chances in central Brazil, with some areas likely to see heavy rainfall.

The long and short of it: Traders will continue to monitor South American forecasts -- especially for the concern areas of central Argentina and southern Brazil -- very closely as this is the critical time frame for crops.

* Consultant further reduces South American crop estimates. Pro Farmer South American crop consultant Dr. Michael Cordonnier says hot, dry conditions are taking a bigger toll on crops in Argentina and southern Brazil, especially the corn crop. Over the past two weeks, Dr. Cordonnier has cut 3 MMT from both his Argentine and Brazilian corn crop estimates. Dr. Cordonnier has reduced his Brazilian bean crop estimate 2 MMT and his Argentine bean crop estimate 1.5 MMT the past two weeks.

The long and short of it: Dr. Cordonnier maintains a negative bias toward the South American corn and bean crops.

* Funds start 2012 as buyers. Funds were net buyers of corn, soybeans and wheat on Tuesday, buying an estimated 13,000 contracts (65 million bu.) of corn, 7,000 contracts (35 million bu.) of soybeans and 2,000 contracts (10 million bu.) of Chicago wheat. Aside from corn, the fund buying was nothing spectacular, but bulls should still be somewhat encouraged that funds were net buyers to start the new year.

The long and short of it: To build on the recent price strength, funds must be active on the long side of the market.


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